Ch.22 Quiz

Instructions
Read the questions carefully.

This assessment is worth 100 points.

  1. The operating cycle is the average time required to manufacture products for sale.   (5 points)

      
      

  2. A master budget is a comprehensive financial plan setting forth the financial and operational goals of a business.   (5 points)

      
      

  3. A cash budget determines the maximum limit amount of money that can be spent during the period.   (5 points)

      
      

  4. The preparation of a budgeted balance sheet requires consideration of the cash inflows and outflows scheduled in the cash budget.   (5 points)

      
      

  5. Flexible budgeting may be viewed as combining the concepts of budgeting with cost-volume-profit analysis.   (5 points)

      
      

  6. Costs that rise and fall proportionately with the volume of output are often referred to as:   (5 points)

    a.  
    b.  
    c.  
    d.  

  7. When budgeted amounts are set at reasonable and achievable levels:   (5 points)

    a.  
    b.  
    c.  
    d.  

  8. A segment of a master budget relating to that portion of a business under the control of a particular manager is termed a:   (5 points)

    a.  
    b.  
    c.  
    d.  

  9. Which of the following is not considered an operating budget?   (5 points)

    a.  
    b.  
    c.  
    d.  

  10. The sales forecast directly affects many elements of the master budget. Which of the following would be least affected by short-term fluctuations in the sales forecasts?   (5 points)

    a.  
    b.  
    c.  
    d.  

  11. Preparation of a budgeted income statement does not require:   (5 points)

    a.  
    b.  
    c.  
    d.  

  12. Which element of a master budget would normally be prepared last?   (5 points)

    a.  
    b.  
    c.  
    d.  

  13. The following information is from the manufacturing budget and budgeted financial statements of Shelley Corp.:



    Refer to the information above. For the year, budgeted purchases of direct materials amounted to:   (5 points)

    a.  
    b.  
    c.  
    d.  

  14. The following information is from the manufacturing budget and budgeted financial statements of Shelley Corp.:



    Refer to the information above. For the year, budgeted cash payments to suppliers amounted to:   (5 points)

    a.  
    b.  
    c.  
    d.  

  15. On March 1, Spicer Corporation plans to borrow $250,000 from the New London State Bank by signing a 12%, 15-year note payable. The note calls for 180 monthly payments of $3,000, which includes both interest and principal components.

    Refer to the information above. Spicer's budgeted interest expense for March is:   (5 points)

    a.  
    b.  
    c.  
    d.  

  16. Seligram Corporation makes all sales on account. The June 30th balance sheet balance in its accounts receivable is $200,000, of which $120,000 pertain to sales that were made during June. Budgeted sales for July are $1,000,000. Seligram collects 70% of sales in the month of sale; 20% in the following month; and the final 10% in the second month after the sale.

    Refer to the information above. What are Seligram's budgeted collections for July?   (5 points)

    a.  
    b.  
    c.  
    d.  

  17. On October 1 of the current year, Bluechip Corporation prepared a cash budget for October, November, and December. All of Bluechip's sales are made on account. The following information was used in preparing estimated cash collections:



    Approximately 60% of all sales are collected in the month of the sale, 30% is collected in the following month, and 10% is collected in the month thereafter.

    Refer to the information above. Budgeted collections from customers in December total:   (5 points)

    a.  
    b.  
    c.  
    d.  

  18. Foothills, Inc. uses a flexible budget. Foothills produced 14,000 units in May incurring direct materials cost of $18,000. Its master budget for the year projected direct materials cost of $180,000, at a production volume of 144,000 units. A flexible budget for May should reflect direct materials cost of:   (5 points)

    a.  
    b.  
    c.  
    d.  

  19. May Corporation had planned to produce 60,000 units of product during the first quarter of the current year. The company prepared the following budget on May 1:



    During the first quarter, May produced 70,000 units and incurred total manufacturing costs of $120,000.

    Refer to the information above. A performance report for May's first quarter of operations using a flexible budget approach would show:   (5 points)

    a.  
    b.  
    c.  
    d.  

  20. Harlow Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 80,000 T-shirts:



    Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income.

    If the concert season is slow due to poor weather, Harlow estimates that sales could fall to as low as 60,000 T-shirts.

    Refer to the information above. Assume Harlow actually achieves the 60,000 unit sales level, and that net income actually earned at this level was $100,000. A performance report would indicate that net income was:   (5 points)

    a.  
    b.  
    c.  
    d.  



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